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CONC 4.1 Content of quotations

Application

CONC 4.1.1 R

1This section, apart from CONC 4.1.4 R, applies to:

  1. (1)

    a firm with respect to consumer credit lending; or

  2. (2)

    a firm with respect to consumer hiring;

including where the firm provides a quotation acting on behalf of a customer.

CONC 4.1.2 R

CONC 4.1.4 R applies to a firm with respect to credit broking, including where the firm provides a quotation acting on behalf of a customer.

Lenders and owners: contents of quotation for certain agreements

CONC 4.1.3 R
  1. (1)

    When a firm provides a quotation to a customer in connection with a prospective credit agreement which would or might be secured on the customer's home, the firm must include (or cause to be included) in the quotation a statement that such security would or might be required.

    [Note: regulation 3a of SI 1999/2725]

  2. (2)

    When a firm provides a quotation to a customer (C) in connection with a prospective credit agreement which would or might be secured on C’s home under which, while C continues to occupy the home as C’s main residence and either:

    1. (a)

      no instalment repayments of the credit secured by a mortgage on C’s home and no payment of interest on the credit (other than interest charged when all or part of the credit is repaid voluntarily by C), are due or capable of becoming due; or

    2. (b)

      the lender cannot enforce the credit agreement by taking possession of or selling (or concurring with any other person in selling) the home or any part of it while C continues to occupy it as C’s main residence; and

    3. (c)

      where (b) applies, although interest payments may become due, no full or partial repayment of the credit secured by a mortgage is due or capable of becoming due.

      [Note: regulation 3B of SI 1999/2725]

    the firm must include (or cause to be included) in the quotation the following statement:

    “CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN DOUBT, SEEK INDEPENDENT ADVICE.”

    [Note: regulation 3A of SI 1999/2725]

  3. (3)

    When a firm provides a quotation to a customer (C) in connection with a prospective credit agreement which would or might be secured on C’s home, other than an agreement to which (2) applies, the firm must include (or cause to be included) in the quotation the following statement:

    “YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.”

    [Note: regulation 3b of SI 1999/2725]

  4. (4)

    When a firm provides a quotation to a customer in connection with a prospective credit agreement which would or might2 be secured on land and under which repayments would be made in a currency other than sterling, the firm must include (or cause to be included) in the quotation the following statement:

    “THE STERLING EQUIVALENT OF YOUR LIABILITY UNDER A FOREIGN CURRENCY MORTGAGE MAY BE INCREASED BY EXCHANGE RATE MOVEMENT.”

    [Note: regulation 4 of SI 1999/2725]

  5. (5)

    When a firm provides a quotation to a customer in connection with a prospective agreement for the bailment of goods which would or might be secured on the customer's home, the firm must include (or cause to be included) in the quotation a statement that such security would or might be required.

    [Note: regulation 5a of SI 1999/2725]

  6. (6)

    When a firm provides a quotation to a customer in connection with a prospective agreement for the bailment of goods which would or might be secured on the customer's home, the firm must include (or cause to be included) in the quotation the following statement:

    “YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A HIRE AGREEMENT SECURED BY A MORTGAGE OR OTHER SECURITY ON YOUR HOME.”

    [Note: regulation 5b of SI 1999/2725]

Credit brokers: contents of quotation for certain agreements

CONC 4.1.4 R
  1. (1)

    When a firm provides a quotation to a customer in connection with a prospective credit agreement which would or might be secured on the customer's home, the firm must include (or cause to be included) in the quotation a statement that such security would or might be required.

    [Note: regulation 6 of SI 1999/2725]

  2. (2)

    When a firm provides a quotation to a customer (C) in connection with a prospective credit agreement which would or might be secured on C’s home under which, while C continues to occupy the home as C’s main residence and either:

    1. (a)

      no instalment repayments of the credit secured by a mortgage on C’s home and no payment of interest on the credit (other than interest charged when all or part of the credit is repaid voluntarily by C), are due or capable of becoming due; or

    2. (b)

      the lender cannot enforce the credit agreement by taking possession of or selling (or concurring with any other person in selling) the home or any part of it while C continues to occupy it as C’s main residence; and

    3. (c)

      where (b) applies, although interest payments may become due, no full or partial repayment of the credit secured by a mortgage is due or capable of becoming due;

    the firm must include (or cause to be included) in the quotation the following statement:

    “CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN DOUBT, SEEK INDEPENDENT ADVICE.”

  3. (3)

    When a firm provides a quotation to a customer (C) in connection with a prospective credit agreement which would or might be secured on C’s home, other than an agreement to which (2) applies, the firm must include (or cause to be included) in the quotation the following statement:

    “YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.”

  4. (4)

    When a firm provides a quotation to a customer in connection with a prospective credit agreement which would be secured on land and under which repayments would be made in a currency other than sterling, the firm must include (or cause to be included) in the quotation the following statement:

    “THE STERLING EQUIVALENT OF YOUR LIABILITY UNDER A FOREIGN CURRENCY MORTGAGE MAY BE INCREASED BY EXCHANGE RATE MOVEMENT.”

  5. (5)

    When a firm provides a quotation to a customer in connection with a prospective agreement for the bailment of goods which would or might be secured on the customer's home, the firm must include (or cause to be included) in the quotation a statement that such security would or might be required.

  6. (6)

    When a firm provides a quotation to a customer in connection with a prospective agreement for the bailment of goods which would or might be secured on the customer's home, the firm must include (or cause to be included) in the quotation the following statement:

    “YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A HIRE AGREEMENT SECURED BY A MORTGAGE OR OTHER SECURITY ON YOUR HOME.”

Interpretation: quotations

CONC 4.1.5 R
  1. (1)

    Paragraphs (2) to (5) apply to CONC 4.1.3 R and CONC 4.1.4 R (rules on content of quotations).

  2. (2)

    “Quotation” means any document by which a person gives a customer information about the terms on which the person or a lender or owner is prepared to do business, but it does not include:

    1. (a)

      a communication which is also a financial promotion;

    2. (b)

      any document given to a customer under section 58 of the CCA (opportunity for withdrawal from prospective land mortgage);

    3. (c)

      any document sent to a customer for signature which embodies the terms or such of them as it is intended to reduce to writing of a credit agreement or a consumer hire agreement; or

    4. (d)

      any copy of an unexecuted agreement delivered or sent to a customer under section 62 of the CCA (duty to supply copy of unexecuted agreement).

  3. (3)

    Where the words of a statement which must be included in a quotation are specified, the statement must be:

    1. (a)

      in capital letters;

    2. (b)

      clear and legible; and

    3. (c)

      prominent.

  4. (4)

    Providing a quotation includes making a quotation available temporarily.

  5. (5)

    In these rules as they apply to Scotland:

    1. (a)

      any reference to bailment is a reference to hiring; and

    2. (b)

      any reference to a mortgage or a charge on land is a reference to a standard security over land within the meaning of the Conveyancing and Feudal Reform (Scotland) Act 1970.

CONC 4.1.6 G

3For the purposes of CONC 4.1.5R(3)(c), a statement included in a quotation will not be treated as prominent unless it is presented, in relation to the other content of the quotation, in such a way that it is likely that the attention of the average customer to whom such a quotation is addressed would be drawn to it.

CONC 4.2 Pre-contract disclosure and adequate explanations

Application

CONC 4.2.1 R

This section, unless otherwise stated in or in relation to a rule:

  1. (1)

    applies to a firm with respect to consumer credit lending;

  2. (2)

    applies to a firm with respect to credit broking where the firm has or takes on responsibility for providing the disclosures and explanations to customers required by this section;

  3. (3)

    does not apply to an agreement under which the lender provides the customer with credit which exceeds £60,260, unless the agreement is a residential renovation agreement5;

  4. (4)

    does not apply to an agreement secured on land; and

  5. (5)

    does not apply to a borrower-lender agreement enabling the customer to overdraw on a current account other than such an agreement which would be an authorised non-business overdraft agreement, but for the fact that the credit is not repayable on demand or within three months.

    [Note: section 74(1D) of CCA]

CONC 4.2.2 G

For the agreements referred to in CONC 4.2.1R (3), (4) and (5), a firm within CONC 4.2.1R (1) or CONC 4.2.1R (2) should consider whether it is necessary or appropriate to provide explanations of the matters in CONC 4.2.5R (2); in particular, a firm should consider highlighting the principal consequences to the customer including the consequences of missing payments or under-paying, including, where applicable, the risk of repossession of the customer's property.

[Note: section 55A(6) of CCA and paragraphs 3.1(box) of ILG]

3

Other disclosure requirements

CONC 4.2.3 G
  1. (1)

    The disclosure regulations made under section 55 of the CCA which require information to be disclosed before a regulated credit agreement is made remain in force.

  2. (2)

    Failure to comply with the disclosure regulations has the effect that agreements are enforceable against a borrower or hirer (as defined in the CCA) only with an order of court and enforcement for that purpose includes a retaking of goods or land to which the agreement relates.

  3. (3)

    Other relevant disclosure requirements are found in CONC 2.7 (distance marketing) and CONC 2.8 (electronic commerce), the Financial Services (Distance Marketing) Regulations 2004 (SI 2004/2095), the Electronic Commerce (EC Directive) Regulations 2002 (SI 2002/2013) and the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/ 1277) and the Cancellation of Contracts made in the Consumer’s home etc Regulations 2008 (SI 2008/1816).

CONC 4.2.4 G

The pre-contractual information disclosed under the disclosure regulations and the pre-contractual explanations required under CONC 4.2.5 R should take into account any preferences expressed, or information provided by, the customer where the firm would in principle agree to offer credit on such terms

[Note: paragraph 3.13 (box) of ILG]

Pre-contractual adequate explanations

CONC 4.2.5 R
  1. (1)

    Before making a regulated credit agreement the firm must:

    1. (a)

      provide the customer with an adequate explanation of the matters referred to in (2) in order to place the customer in a position to assess whether the agreement is adapted to the customer's needs and financial situation;

    2. (b)

      advise the customer:

      1. (i)

        to consider the information which is required to be disclosed under section 55 of the CCA; and

      2. (ii)

        where the information is disclosed in person, that the customer is able to take it away;

    3. (c)

      provide the customer with an opportunity to ask questions about the agreement; and

    4. (d)

      advise the customer how to ask the firm for further information and explanation.

      [Note: section 55A(1) of CCA]

  2. (2)

    The matters referred to in (1)(a) are:

    1. (a)

      the features of the agreement which may make the credit to be provided under the agreement unsuitable for particular types of use;

    2. (b)

      how much the customer will have to pay periodically and, where the amount can be determined, in total under the agreement;

    3. (c)

      the features of the agreement which may operate in a manner which would have a significant adverse effect on the customer in a way which the customer is unlikely to foresee;

    4. (d)

      the principal consequences for the customer arising from a failure to make payments under the agreement at the times required by the agreement including, where applicable and depending upon the type and amount of credit and the circumstances of the customer:

      1. (i)

        the total cost of the debt growing;

      2. (ii)

        incurring any default charges or interest for late or missed payment or under-payment;

      3. (iii)

        impaired credit rating and its effect on future access to or cost of credit;

      4. (iv)

        legal proceedings, including reference to charging orders (or, in Scotland, inhibitions), and to the associated costs of such proceedings;

      5. (v)

        repossession of the customer's home or other property; and

      6. (vi)

        where an article is taken in pawn, that the article might be sold, if not redeemed; and

    5. (e)

      the effect of the exercise of any right to withdraw from the agreement and how and when this right may be exercised.

      [Note: section 55A(2) of CCA and paragraph 3.13 of ILG]

  3. (3)

    The adequate explanation and advice in (1) may be given orally or in writing, except where (4) applies.

    [Note: section 55A(3) of CCA]

  4. (4)

    Where the matters in (2)(a), (b) or (e) are given orally or to the customer in person, the explanation of the matters in (2)(c) and (d) and the advice required in (1)(b) must be given orally to the customer.

    [Note: section 55A(4) of CCA]

  5. (5)

    Paragraphs (1) to (4) do not apply to a lender if a credit broker has complied with those sub-paragraphs in respect of the agreement.

    [Note: section 55A(5) of CCA]

  6. (6)

    Where the regulated credit agreement is an agreement under which a person4 takes an article in pawn:

    1. (a)

      the requirement in (1)(a) only relates to the matters in (2)(d) and (e); and

    2. (b)

      the requirements in (1)(b) and (d) do not apply.

      [Note: section 55A(7) of CCA]

  7. (7)

    This rule does not apply to:

    1. (a)

      a non-commercial agreement;

    2. (b)

      a small borrower-lender-supplier agreement for restricted-use credit

      [Note: section 74(1) of CCA]

  8. (8)

    Where this rule applies to a borrower-lender agreement to finance the making of payments arising on or connected with the death of a person, the payments in question are set out in (9).

    [Note: section 74(1F) of CCA]

  9. (9)

    The payments referred to in (8) are:

    1. (a)

      inheritance tax chargeable in the UK on the death of any person;

    2. (b)

      fees payable to a court:

      1. (i)

        in England, Wales or Northern Ireland on an application for a grant of probate or of letters of administration;

      2. (ii)

        in Scotland, in connection with a grant of confirmation; and

      3. (iii)

        in the UK, on an application for resealing of a Commonwealth or colonial grant of probate or of letters of administration; and

    3. (c)

      payments in England, Wales or Northern Ireland to a surety in connection with a guarantee required as a condition of a grant of letters of administration or payments in Scotland to a cautioner in connection with a bond of caution required as a condition of issuing a grant of confirmation.

      [Note: regulation 2 of SI 1983/1554]

    [Note: article 5(6) of the Consumer Credit Directive]

CONC 4.2.6 G

The explanation provided by a lender or a credit broker under CONC 4.2.5 R should enable the customer to make a reasonable assessment as to whether the customer can afford the credit and to understand the key associated risks.

[Note: paragraph 3.3 (box) of ILG]

CONC 4.2.7 G

In deciding on the level and extent of explanation required by CONC 4.2.5 R, the lender or credit broker should consider (and each of them should ensure that anyone acting on its behalf should consider), to the extent appropriate to do so, factors including:

  1. (1)

    the type of credit being sought;

  2. (2)

    the amount and duration4 of credit to be provided;4

  3. (2A)

    the actual and potential costs of the credit;4

  4. (2B)

    the risk to the customer arising from the credit (the risk to the customer is likely to be greater the higher the total cost of the credit relative to the customer’s financial situation);4

  5. (2C)

    the purpose of the credit, if the lender or (as the case may be) the credit broker knows what that purpose is;4

  6. (3)

    to the extent it is evident and discernible, the customer's level of understanding of the agreement, and of the information and4 the explanation provided about the agreement4; and

  7. (4)

    the channel or medium through which the credit1 transaction takes place.

    [Note: paragraph 3.4 of ILG]

    1
CONC 4.2.7A G
  1. (1)

    4CONC 4.2.5R(1) requires the customer to be provided with an adequate explanation of the matters in CONC 4.2.5R(2). Where there is more than one customer acting together as ‘joint borrowers’, the lender or credit broker should consider whether it may be appropriate to give separate explanations to each customer and whether the explanation should be the same or different for each, rather than giving a single explanation to all of them jointly. (Where the borrower is a partnership or an unincorporated association, the members or partners may be treated as a single customer.)

  2. (2)

    In deciding whether it is appropriate to give separate explanations to each customer, and in determining the level and extent of explanation required for each customer, the lender or credit broker should consider the factors in CONC 4.2.7G separately for each customer.

  3. (3)

    However, CONC 4.2.5R(4) does not require an oral explanation of the matters in CONC 4.2.5R(2)(c) and (d) to be given to one customer simply because an oral explanation of the matters in CONC 4.2.5R(2)(a), (b) or (e) was given to a different customer.

CONC 4.2.8 R

Where the regulated credit agreement is high-cost short-term credit, the lender or a credit broker must explain under CONC 4.2.5R (1)(a) that entering into that agreement would be unsuitable to support sustained borrowing over long periods and would be expensive as a means of longer term borrowing.

[Note: paragraph 3.13 (box) of ILG]

CONC 4.2.9 R

Even where a customer states or implies that there is no need for an explanation of the regulated credit agreement, the lender or credit broker must continue to comply with CONC 4.2.5 R.

[Note: paragraph 3.10 of ILG]

CONC 4.2.10 R

A lender or a credit broker must not encourage or induce a customer to waive the rights in CONC 4.2.5 R.

[Note: paragraph 3.10 of ILG]

CONC 4.2.11 R

Before a lender concludes that CONC 4.2.5R (1) to CONC 4.2.5R (4) do not apply to it in relation to a regulated credit agreement by virtue of CONC 4.2.5R (5), the lender must take reasonable steps to satisfy itself that an explanation of that agreement complying with CONC 4.2.5 R has been provided to the customer by the credit broker.

[Note: paragraph 3.11 (box) of ILG]

CONC 4.2.12 R

The lender or the credit broker must enable a customer to request and obtain further information and explanation about a regulated credit agreement without incurring undue cost or delay.

[Note: paragraph 3.16 (box) of ILG]

CONC 4.2.13 R

Neither a lender nor a credit broker may require a customer to acknowledge that the information and explanations it has provided are adequate to satisfy the requirements of CONC 4.2.5 R.

[Note: paragraph 3.30 (box) of ILG]

CONC 4.2.14 G

A lender or credit broker may require an acknowledgement that it has provided an explanation, and of receipt of any written information that forms a part of the explanation, but not an acknowledgement as to its adequacy. CONC 4.2.13 R does not prevent the lender or credit broker asking if the customer has understood an explanation given.

[Note: paragraph 3.30 (box) of ILG]

Adequate explanations in relation to particular regulated credit agreements

CONC 4.2.15 R

The following information must be provided by the lender or a credit broker as part of, and in addition to that provided under, the adequate explanation required by CONC 4.2.5 R, where applicable, in the specified cases:

  1. (1)

    for credit token agreements:

    1. (a)

      different rates of interest and different charges apply to different elements of the credit provided (for example, a higher cost of withdrawing cash);

    2. (b)

      the implications of only making minimum repayments;

    3. (c)

      interest rates or charges2 may be increased;

    4. (d)

      where applicable, the interest rates may be increased based on the risks presented by the individual customer;

    5. (e)

      the limitations on any zero percentage or low interest or other introductory offer; and

    6. (f)

      conditions on any balance transfers, including any fees and charges which may apply;

  2. (2)

    for credit card cheques, the higher associated costs relative to payment by credit card;

  3. (3)

    for home credit loan agreements and high-cost short-term credit, the effect of refinancing (within the meaning in CONC 6.7.17 R) or otherwise extending the duration of the credit or of the credit agreement;

  4. (4)

    for bill of sale loan agreements:

    1. (a)

      the risk of losing the asset which is the subject of the bill of sale and the loss this could entail;

    2. (b)

      that repossession can take place without a court order;

    3. (c)

      that repossession may not clear the debt owed; and

    4. (d)

      unlike in the case of hire-purchase agreements and conditional sale agreements, the customer is not protected under this arrangement from repossession of the asset where one third or more of the total amount payable has been paid off;

  5. (5)

    for hire purchase agreements and conditional sale agreements:

    1. (a)

      the customer does not own the goods until the sums required under the agreements have been paid, including any option to purchase fee and any other conditions have been satisfied;

    2. (b)

      goods can be repossessed without a court order in the event of default, unless in relation to a regulated credit agreement the customer has paid a third or more of the total amount payable;

  6. (6)

    for a credit agreement which is used to consolidate existing debts of the customer (whether to the same lender or to another person) and where applicable in each case:

    1. (a)

      the effect of consolidating the debts will involve payment of a higher rate of interest or charges or both (if the relevant information about existing debts is known to the lender or credit broker);

    2. (b)

      the effect of consolidating the debts will involve increasing the period required for repayment (if the relevant information about existing debts is known to the lender or credit broker); and

    3. (c)

      the credit agreement would be secured on the customer's property;

  7. (7)

    for a credit agreement which includes a condition requiring a guarantor, the requirement for the customer to provide security in the form of a guarantee.

    [Note: paragraph 4.26c of CBG]

[Note: paragraph 3.13 of ILG]

CONC 4.2.16 G

Where a customer does not have a good understanding of the English language, the lender or credit broker may need to consider alternative methods of providing relevant information concerning the explanation required by CONC 4.2.5 R in order for the customer to make an informed decision, such as, providing the information to a person with such understanding who can assist the customer, for example, a friend or relative.

[Note: paragraph 3.4 (box) of ILG]

Guidance for adequate explanations where agreements are marketed by distance or electronic means

CONC 4.2.17 G

Since the use of distance means of communication (such as the internet) by their nature limit the lender's or credit broker's ability to ascertain the customer's level of understanding of explanations provided, a lender or credit broker using those means may, for example, wish to provide local rate telephone number for customers who wish to seek further explanation.

[Note: paragraph 3.6 (box) of ILG]

CONC 4.2.18 G

Interaction is an important part of compliance with the requirement in CONC 4.2.5R (1), for example, where the agreement is marketed and concluded by electronic means. For an online application, the requirement in CONC 4.2.5R (1)(c) (the right to ask questions) may be complied with by the customer being able to access an appropriately comprehensive set of answers to frequently asked questions about the agreement or by being able to speak to a representative of the online provider.

[Note: paragraph 3.8 (box) of ILG]

CONC 4.2.19 G

For a regulated credit agreement marketed and concluded by electronic means to comply with CONC 4.2.5 R the customer should pass through screens containing the required information and explanations, giving the customer the opportunity to see and read the explanations provided. Merely providing a link to where such information can be found is unlikely to satisfy the requirements in CONC 4.2.5 R, where the agreement can be concluded without accessing the link.

[Note: paragraph 3.15 (box) of ILG]

CONC 4.2.20 G

For telephone or face-to-face transactions, interaction between the customer and the firm's representative is also important. It should be made clear to the customer that the customer can ask questions or request further information or explanation and, for example, the representative solely providing the customer with a written explanation of an agreement, or relying solely on a written script in relation to an agreement, is unlikely to comply with the requirement in CONC 4.2.5 R.

[Note: paragraph 3.9 (box) of ILG]

CONC 4.2.21 G

Where a regulated credit agreement is a modifying agreement under section 82(2) of the CCA, the requirements in CONC 4.2 apply before the agreement is made.

[Note: paragraph 3.12 of ILG]

Credit agreements where there is a guarantor etc

CONC 4.2.22 R
  1. (1)

    4This rule applies if:

    1. (a)

      a firm is to enter into a regulated credit agreement; and

    2. (b)

      an individual other than the borrower (in this rule referred to as “the guarantor”) is to provide a guarantee or an indemnity (or both) in relation to the regulated credit agreement.

  2. (2)

    The firm must, before making the regulated credit agreement, provide the guarantor with an adequate explanation of the matters in (3) in order to place the guarantor in a position to make an informed decision as to whether to act as the guarantor in relation to the regulated credit agreement.

  3. (3)

    The matters are:

    1. (a)

      the circumstances in which the guarantee or the indemnity (or both) might be called on; and

    2. (b)

      the implications for the guarantor of the guarantee or the indemnity (or both) being called on.

  4. (4)

    For the purposes of (2), the rules and guidance listed in (5) apply as if:

    1. (a)

      references to the customer were references to the guarantor; and

    2. (b)

      references to CONC 4.2.5R were references to this rule.

  5. (5)

    The rules and guidance are:

    1. (a)

      CONC 4.2.6G to CONC 4.2.7AG;

    2. (b)

      CONC 4.2.9R and CONC 4.2.10R;

    3. (c)

      CONC 4.2.12R to CONC 4.2.14G; and

    4. (d)

      CONC 4.2.16G to CONC 4.2.21G.

  6. (6)

    For the purposes of this rule, a guarantee does not include a legal or equitable mortgage or a pledge.

CONC 4.2.23 R
  1. (1)

    4CONC 4.2.22R does not apply to a lender if a credit broker, a solicitor, a barrister, (in Scotland) an advocate, or a relevant person has complied with that rule in respect of the agreement.

  2. (2)

    Before a lender concludes that CONC 4.2.22R does not apply to it in relation to a regulated credit agreement by virtue of (1), the lender must take reasonable steps to satisfy itself that:

    1. (a)

      an explanation complying with CONC 4.2.22R(2) has been provided to the guarantor; and

    2. (b)

      the following had been provided to the person giving the explanation, before the explanation was given:

      1. (i)

        a copy of the agreement;

      2. (ii)

        if the guarantee or the indemnity (or both) is contained in a document other than the agreement, a copy of that document; and

      3. (iii)

        a copy of any other document or information in writing relating to the agreement which had been provided to the guarantor by the lender or the credit broker.

  3. (3)

    In this rule, “relevant person” means a person who, for the purposes of the Legal Services Act 2007, is an authorised person in relation to an activity which constitutes the exercise of a right of audience or the conduct of litigation (within the meaning of that Act), and is not a solicitor, a barrister or (in Scotland) an advocate.

CONC 4.2.24 G

4 CONC 4.2.23R permits the explanation required by CONC 4.2.22R to be given by a credit broker. It also permits the explanation to be given by a solicitor, a barrister, a Scottish advocate or another “relevant person” (for example, in the course of giving independent legal advice to the guarantor). The explanation may only be given by such a person if the information and documents listed in that rule had been provided to that person.

CONC 4.3 Pre-contractual requirements and adequate explanations: P2P agreements

Application

CONC 4.3.1 R

This section applies to a firm with respect to operating an electronic system in relation to lending3.

CONC 4.3.2 R

This section (apart from CONC 4.3.6 R) does not apply to:

  1. (1)

    an agreement under which the lender provides the prospective borrower with credit which exceeds £60,260, unless the agreement is a residential renovation agreement2; or

  2. (2)

    an agreement secured on land.

CONC 4.3.3 G

For the agreements referred to in CONC 4.3.2 R, a firm should consider whether it is necessary or appropriate to provide explanations of the matters in CONC 4.5.3R (2), in particular, a firm should consider highlighting key risks to the borrower including the consequences of missing payments or under-paying, including, where applicable, the risk of repossession of the borrower's property.

[Note: section 55A(6) of CCA and paragraph 3.1 of ILG]

[Note: Until the end of 30 September 2014, transitional provisions apply to CONC 4.3.3 G: see CONC TP 4.1]

Pre-contractual requirements

CONC 4.3.3A R
  1. (1)

    3This rule applies if the lender, or the prospective lender, under a P2P agreement is, or would be, carrying on by way of business the regulated activity of entering into a regulated credit agreement as lender by entering into the agreement.

  2. (2)

    Any fee to be paid by the borrower to the operator of an electronic system in relation to lending must be agreed between the borrower and the operator, and that agreement must be recorded in writing or other durable medium before the P2P agreement is entered into.

  3. (3)

    The operator of an electronic system in relation to lending must disclose to the lender the fee, if any, for its activity payable by the borrower for the purpose of enabling the lender to calculate the annual percentage rate of charge for the P2P agreement.

[Note: article 21(b) and (c) of the Consumer Credit Directive]

Adequate explanations

CONC 4.3.4 R
  1. (1)

    Before a P2P agreement is made, the firm must:

    1. (a)

      provide the prospective borrower with an adequate explanation of the matters referred to in (2) in order to place the borrower in a position to assess whether the agreement is adapted to the borrower's needs and financial situation;

    2. (b)

      where the P2P agreement is not a non-commercial agreement, advise the prospective borrower:

      1. (i)

        to consider the information which is required to be disclosed under section 55(1) of the CCA; and

      2. (ii)

        where the information is disclosed in person, that the borrower is able to take it away;

    3. (c)

      provide the prospective borrower with an opportunity to ask questions about the agreement; and

    4. (d)

      advise the prospective borrower how to ask the firm for further information and explanation.

  2. (2)

    The matters referred to in (1)(a) are:

    1. (a)

      the features of the agreement which may make the credit to be provided under the agreement unsuitable for particular types of use;

    2. (b)

      how much the borrower will have to pay periodically and, where the amount can be determined, in total under the agreement;

    3. (c)

      the features of the agreement which may operate in a manner which would have a significant adverse effect on the borrower in a way which the prospective borrower is unlikely to foresee;

    4. (d)

      the principal consequences for the borrower arising from a failure to make payments under the agreement at the times required by the agreement, including legal proceedings and, where this is a possibility, repossession of the borrower's home; and

    5. (e)

      the effect of the exercise of any right to withdraw from the agreement and how and when this right may be exercised.

  3. (3)

    Except where (4) applies, the adequate explanation and advice in (1) may be given orally or in writing.

  4. (4)

    Where the matters in (2)(a), (b) or (e) are given orally or to the prospective borrower in person, the explanation of the matters in (2)(c) and (d) and the advice required in (1)(b) must be given orally to the borrower.

  5. (5)

    Where this rule applies to a borrower-lender agreement to finance the making of payments arising on or connected with the death of a person, this rule applies to the agreement to the extent the payments are:

    1. (a)

      inheritance tax chargeable in the UK on the death of any person;

    2. (b)

      fees payable to a court:

      1. (i)

        in England, Wales or Northern Ireland on an application for a grant of probate or of letters of administration;

      2. (ii)

        in Scotland, in connection with a grant of confirmation; and

      3. (iii)

        in the UK, on an application for resealing of a Commonwealth or colonial grant of probate or of letters of administration; and

    3. (c)

      payments in England, Wales or Northern Ireland to a surety in connection with a guarantee required as a condition of a grant of letters of administration or payments in Scotland to a cautioner in connection with a bond of caution required as a condition of issuing a grant of confirmation.

      [Note: section 74(1F) of CCA and SI 1983/1554]

      [Note: Until the end of 30 September 2014, transitional provisions apply to CONC 4.3.4 R: see CONC TP 4.1]

CONC 4.3.5 R

Where CONC 4.3.4 R applies to a firm, the firm must comply with the rules, and observe the guidance, in CONC 4.2 to the same extent as if it were the lender under an agreement to which those rules apply.

[Note: Until the end of 30 September 2014, transitional provisions apply to CONC 4.3.5 R: see CONC TP 4.1]

CONC 4.3.6 R

Before a P2P agreement which is secured on the borrower's home is made, a firm must in a prominent way give the following warning:

“YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT”

CONC 4.3.7 G

1For the purposes of CONC 4.3.6R, a warning will not be treated as prominent unless it is presented in such a way that it is likely that the attention of the average customer would be drawn to it.

P2P agreements where there is a guarantor etc

CONC 4.3.8 R
  1. (1)

    1This rule applies if:

    1. (a)

      a firm with permission to carry on the activity of operating an electronic system in relation to lending is to facilitate the entry into a P2P agreement;

    2. (b)

      the prospective borrower is an individual; and

    3. (c)

      an individual other than the borrower (in this rule referred to as “the guarantor”) is to provide a guarantee or an indemnity (or both) in relation to the P2P agreement.

  2. (2)

    The firm must, before the P2P agreement is made, provide the guarantor with an adequate explanation of the matters in (3) in order to place the guarantor in a position to make an informed decision as to whether to act as the guarantor in relation to the P2P agreement.

  3. (3)

    The matters are:

    1. (a)

      the circumstances in which the guarantee or the indemnity (or both) might be called on; and

    2. (b)

      the implications for the guarantor of the guarantee or the indemnity (or both) being called on.

  4. (4)

    For the purposes of (2), the rules and guidance listed in (5) apply as if:

    1. (a)

      references to the customer were references to the guarantor;

    2. (b)

      references to CONC 4.2.5R were references to this rule; and

    3. (c)

      references to the regulated credit agreement were references to the P2P agreement.

  5. (5)

    The rules and guidance are:

    1. (a)

      CONC 4.2.6G to CONC 4.2.7AG;

    2. (b)

      CONC 4.2.9R and CONC 4.2.10R;

    3. (c)

      CONC 4.2.12R to CONC 4.2.14G; and

    4. (d)

      CONC 4.2.16G to CONC 4.2.21G.

  6. (6)

    For the purposes of this rule, a guarantee does not include a legal or equitable mortgage or a pledge.

CONC 4.4 Pre-contractual requirements: credit brokers

Application

CONC 4.4.1 R

This section applies to a firm carrying on credit broking in relation to a regulated credit agreement.

CONC 4.4.1A R

1 CONC 4.4.3 R applies to a firm carrying on credit broking whether or not it is in relation to a regulated credit agreement.

Pre-contractual requirements

CONC 4.4.2 R
  1. (1)

    A firm must disclose to the customer the fee, if any, payable by a customer to the firm for its services.

    [Note: section 160A(4) of CCA]

  2. (2)

    Any fee to be paid by the customer to the firm must be agreed between the customer and the firm, and that agreement must be recorded in writing or other durable medium before a regulated credit agreement is entered into.

    [Note: section 160A(4) of CCA]

  3. (3)

    A firm must disclose to the lender the fee, if any, for its activity payable by the customer for the purpose of enabling the lender to calculate the annual percentage rate of charge for the credit agreement.

    [Note: section 160A(5) of CCA]

  4. (4)

    A firm must disclose to the customer how and when any fee for its service is payable and in what circumstances a refund may be payable, including how and when a refund is available under section 155 of the CCA.

    [Note:paragraphs 2.2 and 4.17b of CBG]

[Note: article 21(b) and (c) of the Consumer Credit Directive]

1Credit broking information notice

CONC 4.4.3 R
  1. (1)

    1A firm must not:

    1. (a)

      request, claim, demand, initiate or take payment of a charge from a customer, or from the customer's payment account, in connection with services it has provided or is to provide; or

    2. (b)

      if the purpose, or one of the purposes, is to collect such a charge from a customer, invite or induce a customer to provide information in relation to a payment card or instrument that would enable a payment from the customer's payment account to be initiated by or through the firm or a third party or facilitate the provision of that information by a customer;

    unless that firm has met the conditions in both (2) and (3) in respect of that charge.

  2. (2)

    The first condition referred to in (1) is that the firm has sent a notice on paper or in another durable medium to the customer setting out the following clearly, concisely and in plain language (in this rule and CONC 4.4.5 G referred to as the “information notice”):

    1. (a)

      the legal name of the firm as it appears in the Financial Services Register;

    2. (b)

      if the firm is not a lender, a statement that the firm is a credit broker and that it is not a lender;

    3. (c)

      if the firm is also a lender, a statement that the firm is acting as a credit broker and that it is not acting as a lender;

    4. (d)

      a statement that the customer will be required, or (where relevant) may be required, to pay a charge in connection with the firm's services;

    5. (e)

      the amount of the charge, or, where that amount is not ascertainable at the time the notice is sent, the basis on which it will be calculated; and

    6. (f)

      when and by what method the firm will initiate or take payment of the charge.

  3. (3)

    The second condition referred to in (1) is that the firm has received from the customer a reply to the information notice (in this rule and CONC 4.4.5 G referred to as the “customer confirmation”) on paper or in another durable medium in which the customer acknowledges receipt of the information notice and confirms that he is aware of its contents.

  4. (4)

    The information notice may also contain the firm's trading name, address and other contact details but must not contain any other statements or information additional to those required by (2).

  5. (5)

    For the purposes of this rule:

    1. (a)

      references to “charge” include any fee, charge or financial consideration however described;

    2. (b)

      it is immaterial whether the charge is payable to the firm or to a third party.

  6. (6)

    The firm must keep a record of:

    1. (a)

      each information notice; and

    2. (b)

      each customer confirmation.

CONC 4.4.4 R

1 CONC 4.4.3 R does not apply where:

  1. (1)

    the customer indicates to the firm that he wishes to enter into a credit agreement secured by a legal or equitable mortgage on land;

  2. (2)

    the firm makes it clear to the customer that it is willing to carry on credit broking for that customer only in relation to credit agreements secured by a legal or equitable mortgage on land; and

  3. (3)

    the firm does not indicate (by express words or otherwise) that it is willing to carry on credit broking for that customer in relation to credit agreements other than credit agreements secured by a legal or equitable mortgage on land.

CONC 4.4.5 G
  1. (1)

    1CONC 4.4.3 R prohibits a firm from asking a customer for any payment details, including the card number and security code of a debit card or a credit card, or using those payment details, without first sending an information notice to the customer and receiving a customer confirmation.

  2. (2)

    CONC 4.4.3 R applies in respect of any sum due from a customer, however it is described and irrespective of whether it is payable to the firm or a third party (for example, a firm cannot avoid the application of this rule by describing a charge as a “membership fee” or a “web registration fee”). The fact that a fee or charge may be financed by credit does not take the fee or charge outside the rule.

  3. (3)

    The information notice must not contain anything other than the statements and information required by CONC 4.4.3R (2), except for the firm's trading name, address and other contact details. It should set out the required information clearly and concisely, in plain language. The information notice must be sent to the customer in a durable medium, for example on paper, as an email, or as an attachment to an email: it is insufficient to make the notice available on a website or to email a link to a webpage that contains the relevant information and statements.

  4. (4)

    The firm should not ask for or take the customer's payment details until it has received the customer confirmation. This means, for example, that firms should construct their websites so that customers cannot access any webpage that enables them to input their payment details before they have received the information notice and given the customer confirmation.

  5. (5)

    CONC 4.4.3 R applies to each firm in a chain of credit brokers separately. If firm A introduces the customer to firm B (where B is a credit broker), any information notice given by A cannot cover fees which B might charge: B will have to issue its own information notice to the customer, and the customer will have to provide a separate customer confirmation, before B can ask for or make use of the customer's payment details.

  6. (6)

    CONC 4.4.3 R does not apply to credit broking that relates only to credit agreements secured on land.

CONC 4.5 Commissions

Application

CONC 4.5.1 R
  1. (1)

    CONC 4.5.2 G applies to a firm with respect to consumer credit lending.

  2. (2)

    CONC 4.5.3 R and CONC 4.5.4 R apply to a firm with respect to credit broking in relation to:

    1. (a)

      regulated credit agreements; and

    2. (b)

      regulated consumer hire agreements.

  3. (3)

    CONC 4.5.3 R and CONC 4.5.4 R also apply to a firm carrying on the activities specified in article 36A(1)(a) or (c) of the Regulated Activities Order in relation to:

    1. (a)

      credit agreements that would be regulated credit agreements but for the relevant provisions; and

    2. (b)

      consumer hire agreements that would be regulated consumer hire agreements but for articles 60O and 60Q of the Regulated Activities Order.

Commissions lenders to credit brokers

CONC 4.5.2 G

A lender should only offer to, or enter into with, a firm a commission agreement providing for differential commission rates or providing for payments based on the volume and profitability of business where such payments are justified based on the extra work of the firm involved in that business.

[Note: paragraph 5.5 (box) of ILG]

Commissions: credit brokers

CONC 4.5.3 R

A credit broker must disclose to a customer in good time before a credit agreement or a consumer hire agreement is entered into, the existence of any commission or fee or other remuneration payable to the credit broker by the lender or owner or a third party in relation to a credit agreement or a consumer hire agreement, where knowledge of the existence or amount of the commission could actually or potentially:

  1. (1)

    affect the impartiality of the credit broker in recommending a particular product; or

  2. (2)

    have a material impact on the customer's transactional decision.

    [Note: paragraph 3.7i (box) and 3.7j of CBG and 5.5 (box) of ILG]

CONC 4.5.4 R

At the request of the customer, a credit broker must disclose to the customer, in good time before a regulated credit agreement or a regulated consumer hire agreement is entered into, the amount (or if the precise amount is not known, the likely amount) of any commission or fee or other remuneration payable to the credit broker by the lender or owner or a third party.

[Note: paragraph 3.7i (box) of CBG]

CONC 4.6 Pre-contract disclosure: continuous payment authorities

Application

CONC 4.6.1 R
  1. (1)

    This section applies to:

    1. (a)

      a firm with respect to consumer credit lending; or

    2. (b)

      a firm with respect to consumer hiring; or

    3. (c)

      a firm with respect to operating an electronic system in relation to lending in relation to a prospective borrower under a P2P agreement.

Disclosure of continuous payment authorities

CONC 4.6.2 R
  1. (1)

    Before entering into a regulated credit agreement or regulated consumer hire agreement, or before a P2P agreement is entered into, under which the customer may grant a continuous payment authority, the firm must provide the customer with an adequate explanation of the matters in (2).

  2. (2)

    The matters referred to in (1) are:

    1. (a)

      what a continuous payment authority is and how it works;

    2. (b)

      how the continuous payment authority will be applied by the firm, including where the firm provides high-cost short-term credit that it may only be used twice to collect the whole sum due in relation to the agreement or where the agreement provides for repayment in instalments, in relation to an instalment;

    3. (c)

      how the customer can cancel the continuous payment authority;

    4. (d)

      whether alternative repayment options are available;

    5. (e)

      the choice of an appropriate due date for payment;

    6. (f)

      the choice of an alternative payment date (if applicable);

    7. (g)

      the consequences if sufficient funds are not available on the due date (or an alternative payment date if agreed);

    8. (h)

      whether further attempts may be made to collect payment and, if so, the basis on which further attempts would be made, the days or period over which the further attempts would be made and the frequency of the further attempts;

    9. (i)

      other than in relation to high-cost short-term credit, whether part payment (a sum due which less than the full sum due at the time the firm's payment request is made) may be sought and, if so, the basis on which and frequency with which payment would be sought and whether part payments would be subject to a minimum amount or percentage;

    10. (j)

      in relation to high-cost short-term credit, the firm will not seek part payment (a sum due which is less than the full sum due at the time the firm's payment request is made) unless the firm is willing to accept such less sum and, after being notified of that sum and when a payment request would be made, the customer has given express consent to the firm to make such a payment request; and

    11. (k)

      whether default fees and other charges may be added and, if so, the circumstances in which these may be incurred and the amount of such fees and charges or the basis on which they will be calculated.

      [Note: paragraph 3.9miii of DCG]

CONC 4.6.3 R

A firm must include the terms of the continuous payment authority, in plain and intelligible language,1 as part of the credit agreement or consumer hire agreement presented to the customer or P2P agreement presented to the borrower.

[Note: paragraph 3.9miii of DCG]

CONC 4.6.4 R

[deleted]1

Agreements where there is a guarantor etc

CONC 4.6.5 R
  1. (1)

    1This rule applies if:

    1. (a)

      a firm is to enter into a regulated credit agreement or a regulated consumer hire agreement, or is to facilitate the entry into a P2P agreement;

    2. (b)

      an individual other than the borrower or the hirer (in this rule referred to as “the guarantor”) is to provide a guarantee or an indemnity (or both) in relation to the regulated credit agreement, the regulated consumer hire agreement or the P2P agreement; and

    3. (c)

      the guarantor is to grant a continuous payment authority.

  2. (2)

    The firm must, before the guarantor provides the guarantee or the indemnity, provide the guarantor with an adequate explanation of the matters in CONC 4.6.2R(2).

  3. (3)

    For the purposes of (2), CONC 4.6.2R(2) applies as if references to the customer were references to the guarantor.

  4. (4)

    The firm must include the terms of the continuous payment authority, in plain and intelligible language, in the document that includes the guarantee or the indemnity (or both).

  5. (5)

    For the purposes of this rule, a guarantee does not include a legal or equitable mortgage or a pledge.

CONC 4.7 Information to be provided on entering a current account agreement

Application

CONC 4.7.1 R

This section applies to a firm with respect to consumer credit lending.

Information on entering into current account

CONC 4.7.2 R
  1. (1)

    When a firm enters into a current account agreement where:

    1. (a)

      there is a possibility that the account-holder may be allowed to overdraw on the current account without a pre-arranged overdraft or exceed a pre-arranged overdraft limit; and

    2. (b)

      if the account-holder did so, this would be a regulated credit agreement;

    the current account agreement must contain the information in (2) and (3).[Note: section 74A(1) of CCA]

  2. (2)

    The information required by (1) is:

    1. (a)

      the rate of interest charged on the amount by which the account-holder overdraws on the current account or exceeds the pre-arranged overdraft limit;

    2. (b)

      any conditions applicable to that rate;

    3. (c)

      any reference rate on which that rate is based;

    4. (d)

      information on any changes to that rate of interest (including the periods that the rate applies to and any conditions or procedure applicable to changing that rate); and

    5. (e)

      any other charges payable by the account holder under the agreement (and the conditions under which those charges may be varied).[Note: section 74A(2) of CCA]

  3. (3)

    Where different rates of interest are charged in different circumstances, the firm must provide the information in (2)(a) to (d) in respect of each rate. [Note: section 74A(4) of CCA]

[Note: article 18 of the Consumer Credit Directive]

CONC 4.8 Pre-contract: unfair business practices: consumer credit lending

Application

CONC 4.8.1 R

This section applies to a firm carrying on consumer credit lending.

Unfair business practices

CONC 4.8.2 R

A firm must not unfairly encourage, incentivise or induce a customer to enter into a regulated credit agreement quickly without allowing the customer time to consider the pre-contract information under section 55 of the CCA and the explanations provided under CONC 4.2.5 R.

[Note: paragraph 5.10 of ILG]

CONC 4.8.3 G

Stating an end date for a promotion would not amount to the behaviour in CONC 4.8.2 R.

[Note: paragraph 5.10 (box) of ILG]

CONC 4.8.4 R

A firm must not unfairly encourage, incentivise or induce a customer to enter into a regulated credit agreement for an amount higher than the customer requests.

[Note: paragraph 5.11 of ILG]

CONC 4.8.5 G

Merely offering a customer more credit than the customer requested would not amount to the behaviour in CONC 4.8.4 R where:

  1. (1)

    the offer of the higher amount was based on a proper creditworthiness assessment or assessment required by CONC 5.2.2R (1); or

  2. (2)

    the firm offers more advantageous terms, conditions or prices to customers for larger loans, provided that such offers are sufficiently transparent and a proper creditworthiness assessment or assessment required by CONC 5.2.2R (1) has been carried out;

and the customer was not pressurised or unfairly coerced into accepting the higher amount of credit.

[Note: paragraph 5.11 (box) of ILG]

CONC 4.8.6 R

A firm must not lead a customer to believe that the customer's current debt repayments can be reduced under a regulated credit agreement over the same term when this is not the case.

[Note: paragraph 5.13 of ILG]